69% plan pay rise of 2% or more in 2015

More than two-thirds (69%) of private sector employers expect to increase their basic pay award by at least 2% in 2015, according to research from the Chartered Institute of Personnel and Development (CIPD).

This comes as 39% of staff experienced a pay freeze in 2014, highlighting an increasing pay divide between employers who can now afford pay increases and those that cannot.

The Labour market outlook, which surveyed 1,000 UK employers, also found that 3% of staff had experienced a pay cut in the 12 months to December 2014.

More than half (54%) of public sector employers and 45% of SMEs froze basic pay in the same period.

Further findings include:

40% have received a pay increase of 2% or more, and 18% fall in the middle ground of staff who have received an increase in the 0.1-1.99% margin.

48% of private sector employers surveyed said that they gave a basic pay increase of at least 2% in 2014, including more than half of manufacturing and production firms (54%). During the same period, more than a third of manufacturing and production firms (35%) froze employees’ pay.

47% of services organisations awarded a basic pay increase of 2% or more in the 12 months to December 2014, while more than a third (35%) imposed a pay freeze.

Employment confidence is set to remain strong over the next three months, as this quarter’s net employment balance, which measures the difference between the proportion of employers who expect to increase and those that intend to decrease staff levels, has decreased to +24, which is six percentage points lower than the +30 reported in autumn 2014.

Private sector firms will continue to drive most of the jobs growth (+38), and there was a particularly robust performance from the financial sector (+38).

65% plan to recruit in the next three months and hiring intentions are strongest in healthcare (79%), accommodation and food services (72%), arts, entertainment and recreation (72%) and financial, insurance and real estate sectors (70%).

Gerwyn Davies, labour market analyst for the CIPD, said: “The figures show a clear gap between employees that have comfortably exceeded the current inflation rate in their pay packets and those who haven’t seen any increase at all.

“What is interesting is that this gap exists within sectors, with a significant proportion of employers able to afford a 2% or above pay increase and a significant proportion of organisations in the same sector imposing a pay freeze.

“It comes down to what businesses can afford, and productivity lies at the heart of an organisation’s ability to increase real wages above the rate of inflation.

“The report also implies that the difference within sectors between organisations that can afford to pay a decent pay rise and those that are continuing to freeze pay lies partly in the quality of leadership and management and level of workforce investment. There is evidence that organisations that have more sophisticated product market strategies are more likely to have adopted more advanced management strategies characterised by more progressive people practices and greater workforce investment.”